Background: Increasing evidence on associations between mental health and chronic diseases like cardio-vascular disease and diabetes together with the fact that little is known about the prevalence of anxiety/depression and associated risk factors among Iraqi immigrants to Sweden, warrants a study in this group. The aim was to study the prevalence of anxiety and depression in immigrants from Iraq compared to native Swedes and compare socioeconomic and lifestyle-related factors associated with these conditions. Method: A population-based, cross-sectional study of residents of Malmö, Sweden, aged 30–75 years, born in Iraq or Sweden. The overall response rate was 49% for Iraqis and 32% for Swedes. Anxiety and depression were assessed using the Hospital Anxiety and Depression Scale. Associations were studied using multivariate logistic regression models. The outcome was odds of depression and/or anxiety. Results: Compared to Swedes (n = 634), anxiety was three times as prevalent (52.6 vs. 16.3%, p < 0.001) and depression five times as prevalent (16.3 vs. 3.1%, p < 0.001) in Iraqi immigrants (n = 1255). Iraqis were three times more likely to be anxious and/or depressed compared to Swedes (odds ratio (OR) 3.02, 95% confidence interval (CI) 2.06-4.41). Among Iraqis, physical inactivity (<150 min/week) (OR 2.00, 95% CI 1.49-2.69), economic insecurity (OR 2.16, 95% CI 1.56-3.01), inability to trust people (OR 1.75, 95% CI 1.28-2.39) and smoking (OR 1.43, 95% CI 1.02-2.01), were strongly associated with anxiety/depression. Among Swedes, living alone (OR 2.10, 95% CI 1.36-3.25) and economic insecurity (OR 2.38, 95% CI 1.38-4.12) showed the strongest associations with anxiety/depression. Country of birth modified the effect of physical inactivity (Pinteraction =0.058) as well as of marital status (Pinteraction =0.001). Conclusion: Our study indicates that economic insecurity has a major impact on poor mental health irrespective of ethnic background but that physical inactivity may be more strongly associated with anxiety/depression in immigrants from the Middle East compared to native Swedes. Preventive actions emphasizing increased physical activity may reduce the risk of poor mental health in immigrants from the Middle East, however intervention studies are warranted to test this hypothesis.